AMAZON.COM ANNOUNCES 28% SALES GROWTH FUELED BY LOWER PRICES;
FREE SUPER SAVER SHIPPING ON ORDERS OVER $25 TO CONTINUE YEAR-ROUND
SEATTLE—(BUSINESS WIRE)—January 23, 2003—Amazon.com, Inc. (NASD: AMZN), today announced financial
results for its fourth quarter and fiscal year ended December 31, 2002.
Free cash flow was $135 million for fiscal 2002, compared with negative $170 million for 2001. Free cash flow includes
cash outflows for interest and capital expenditures and excludes proceeds from the exercise of stock-based employee
awards.
Common shares outstanding plus shares underlying stock-based employee awards totaled 433 million at December 31,
2002, a decrease of 1% compared with a year ago.
Net sales were a record $1.429 billion in the fourth quarter, compared with $1.115 billion in the fourth quarter 2001, an
increase of 28%. Net sales grew 26% to a record $3.933 billion for fiscal 2002, compared with $3.122 billion for 2001.
Operating income was $71 million in the fourth quarter, or 5% of net sales, compared with $15 million in the fourth
quarter 2001. Operating income for fiscal 2002 improved to $64 million, or 2% of net sales, compared with a 2001
operating loss of $412 million. Pro forma operating profit in the fourth quarter grew 74% to $102 million, or 7% of net
sales, compared with a fourth quarter 2001 pro forma operating profit of $59 million. Pro forma operating profit for fiscal
2002 was $180 million, or 5% of net sales, an improvement of $225 million compared with 2001.
Net income was $3 million, or $0.01 per share, in the fourth quarter, compared with $5 million in the fourth quarter 2001,
or $0.01 per share. Net loss for fiscal 2002 was $149 million, or $0.39 per share, compared with $567 million, or $1.56
per share, in 2001. Pro forma net profit in the fourth quarter, which includes interest expense, grew over $40 million to
$75 million, or $0.19 per share, compared with $35 million, or $0.09 per share, in the fourth quarter 2001. Pro forma net
profit for fiscal 2002 improved over $223 million to $66 million, or $0.17 per share, compared with a 2001 pro forma net
loss of $157 million, or $0.43 per share. (Details on the differences between GAAP results and pro forma results are
included below, with a tabular reconciliation of those differences included in the attached financial statements.)
“On top of the five price cuts we’ve made over the past 18 months, we’re announcing today that we’ve decided to make
Free Super Saver Shipping on orders over $25 a full-time, year-round offer,” said Jeff Bezos, Amazon.com founder and
CEO. “We’re at a tipping point. Customers are now shopping at Amazon.com as much for our lower prices as for our
selection and convenience.”
In addition to its year-round Free Super Saver Shipping on orders over $25 at www.amazon.com, the Company offers free
shipping options at its U.K., German, French, Japanese and Canadian sites. Amazon.com also offers 30% off books over
$15 and significantly lowered prices on electronics, tools, and bestselling CDs and DVDs.
“Our continued operational progress and momentum allow us to offer year-round free shipping and at the same time
increase our 2003 guidance,” said Tom Szkutak, chief financial officer of Amazon.com. “Our 2003 objective is to
continue improving productivity and lowering prices for customers.”
Highlights of Fourth Quarter and Fiscal 2002 Results (comparisons are with the equivalent period of 2001)


Worldwide unit growth was 34% for 2002.
Third-party seller transactions (new, used and refurbished items sold on Amazon.com product detail pages by
businesses and individuals) grew to 21% of worldwide units in the fourth quarter, compared with 16% of units a
year ago.
Page 1 of 16





Inventory turns improved 22% to 19 for 2002, up from 16.
Books, Music and DVD/Video segment sales grew 13% to $606 million in the fourth quarter and pro forma
operating profit grew 14% to $73 million.
Electronics, Tools and Kitchen segment sales grew 21% to $262 million in the fourth quarter and pro forma
operating loss declined 52% to $10 million.
International segment sales, representing the Company’s U.K., German, French and Japanese sites, grew 76% to
$461 million in the fourth quarter and exceeded $1 billion for the first time with sales of $1.169 billion in 2002.
Pro forma operating profit was $20 million in the fourth quarter, or 4% of net sales, and approached breakeven for
2002.
Apparel and Accessories, with more than 450 brands and one shopping cart, is the Company’s fastest growing
store in terms of units sold in the first 60 days since it opened in November.
Financial Guidance and 2003 Expectations
The following forward-looking statements reflect Amazon.com’s expectations as of January 23, 2003. Results may be
materially affected by many factors, such as changes in global economic conditions and consumer spending, fluctuations
in foreign-currency rates, the emerging nature and rate of growth of the Internet and online commerce, and the various
factors detailed below.
First Quarter 2003 Guidance
 First quarter net sales are expected to be between $1.025 billion and $1.075 billion, or grow between 21% and
27%.
 First quarter pro forma net profit is expected to be between $5 million and $20 million, or between $0.01 per
share and $0.05 per share.
Full Year 2003 Expectations
 Net sales are expected to grow over 15%.
 Pro forma net profit is expected to be over $115 million, or over $0.27 per share.
A conference call will be Webcast live today at 2 p.m. PT/5 p.m. ET and will be available through March 31, 2003, at
www.amazon.com/ir. This call will contain forward-looking statements and other material information.
These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety
of reasons, including, among others, the rate of growth of the economy in general and of the Internet and online
commerce; customer spending patterns; the amount that Amazon.com invests in new business opportunities and the
timing of those investments; the mix of products sold to customers; the mix of net sales derived from products as
compared with services; competition; risks of inventory management; the degree to which the Company enters into,
maintains and develops service relationships with third-party sellers and other strategic transactions; foreign-currency
exchange risks; seasonality; international growth and expansion; risks of fulfillment throughput and productivity; and
fluctuations in the value of securities and non-cash payments Amazon.com receives in connection with such
transactions. Other risks and uncertainties include, among others, risk of future losses, significant amount of
indebtedness, potential fluctuations in operating results, management of potential growth, system interruptions,
consumer trends, fulfillment center optimization, inventory, limited operating history, government regulation and
taxation, customer or third-party sellers fraud, Amazon.com Payments, and new business areas, business combinations
and strategic alliances. More information about factors that potentially could affect Amazon.com’s financial results is
included in Amazon.com’s filings with the Securities and Exchange Commission, including its Annual Report on Form
10-K for the year ended December 31, 2001, and all subsequent filings.
Pro Forma Results
Pro forma results, which generally exclude non-operational, non-cash expenses and income as well as one-time charges,
are provided as a complement to results provided in accordance with accounting principles generally accepted in the
United States (known as “GAAP”). Management uses such pro forma measures internally to evaluate the Company’s
Page 2 of 16
performance and manage its operations. A reconciliation of GAAP to pro forma is included in the attached financial
statements.
Pro forma operating profit (loss) excludes the following line items on the Company’s statements of operations:
 Stock-based compensation,
 Amortization of goodwill and other intangibles, and
 Restructuring-related and other.
Pro forma net profit (loss) excludes, in addition to the line items described above, the following line items on the
Company’s statements of operations:
 Other gains (losses), net,
 Equity in losses of equity-method investees, net, and
 Cumulative effect of change in accounting principle.
About Amazon.com
Amazon.com, a Fortune 500 company based in Seattle, opened its virtual doors on the World Wide Web in July 1995 and
today offers Earth's Biggest Selection. Amazon.com seeks to be the world's most customer-centric company, where
customers can find and discover anything they might want to buy online at a great price. Amazon.com and sellers list
millions of unique new and used items in categories such as apparel and accessories, electronics, computers, kitchen and
housewares, books, music, DVDs, videos, cameras and photo items, office products, toys, baby items and baby registry,
software, computer and video games, cell phones and service, tools and hardware, travel services, magazine subscriptions
and outdoor living items. Through Amazon Marketplace, zShops and Auctions, any business or individual can sell
virtually anything to Amazon.com's millions of customers.
Amazon.com operates six global Web sites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr,
www.amazon.co.jp and www.amazon.ca.
Contact:
Amazon.com Investor Relations
Tim Halladay, 206/266-2171, [email protected]
Amazon.com Public Relations
Bill Curry, 206/266-7180
Page 3 of 16
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
December 31,
2002
2001
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation of fixed assets and other amortization
Stock-based compensation
Equity in losses of equity-method investees, net
Amortization of goodwill and other intangibles
Non-cash restructuring-related and other
Gain on sale of marketable securities, net
Other losses (gains), net
Non-cash interest expense and other
Cumulative effect of change in accounting principle
Changes in operating assets and liabilities:
Inventories
Accounts receivable, net and other current assets
Accounts payable
Accrued expenses and other current liabilities
Unearned revenue
Amortization of previously unearned revenue
Interest payable
Net cash provided by (used in) operating activities
$
INVESTING ACTIVITIES:
Sales and maturities of marketable securities and other investments
Purchases of marketable securities
Purchases of fixed assets, including internal-use software and Web site development
Investments in equity-method investees and other investments
Net cash used in investing activities
FINANCING ACTIVITIES:
Proceeds from exercise of stock options and other
Proceeds from issuance of common stock, net of issuance costs
Proceeds from long-term debt and other
Repayment of capital lease obligations and other
Net cash provided by (used in) financing activities
Effect of exchange-rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital leases and other financing arrangements
Equity securities received for commercial agreements
Stock issued in connection with business acquisitions and minority investments
Cash paid for interest
$
327,564
2002
432,307
2,651
5,087
19,863
35,680
700
913
1,100
(1,867)
40,596
7,150
-
$
2001
540,282
$
822,435
(149,132)
(567,277)
21,047
1,937
1,855
37,537
2,883
(198)
(16,312)
6,510
-
82,274
68,927
4,169
5,478
3,470
(5,700)
96,273
29,586
(801)
84,709
4,637
30,327
181,033
73,293
(1,335)
2,141
26,629
10,523
(48,368)
(1,528)
262,838
41,946
19,763
(37,725)
28,867
372,579
(13,813)
2,641
209,546
65,243
38,098
(40,408)
27,467
349,120
(51,303)
(32,948)
156,542
4,491
95,404
(135,466)
3,027
174,291
30,628
20,732
(44,438)
50,031
114,738
(135,808)
(345)
(119,782)
152,757
(173,520)
(15,516)
(36,279)
67,316
(286,214)
(7,534)
(6,198)
(232,630)
553,289
(635,810)
(39,163)
(121,684)
370,377
(567,152)
(50,321)
(6,198)
(253,294)
65,376
(2,674)
62,702
11,688
410,690
738,254
2,047
(4,440)
(2,393)
(6,122)
107,975
540,282
121,689
(14,795)
106,894
38,471
197,972
738,254
16,625
99,831
10,000
(19,575)
106,881
(15,958)
(282,153)
540,282
726
642
Note: The attached "Financial and Operational Highlights" are an integral part of the press release financial statements.
Page 4 of 16
$
Year Ended
December 31,
$
$
1,114
5,000
1,194
$
$
3,023
111,589
$
$
5,597
331
5,000
112,184
AMAZON.COM, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
December 31,
2002
2001
Net sales
Cost of sales
Gross profit
$
Operating expenses:
Fulfillment
Marketing
Technology and content
General and administrative
Stock-based compensation (1)
Amortization of goodwill and other intangibles
Restructuring-related and other
Total operating expenses
1,428,610
1,093,451
335,159
2002
1,115,171
841,122
274,049
$
2001
3,932,936
2,940,318
992,618
$
3,122,433
2,323,875
798,558
126,559
37,579
49,048
20,015
35,680
913
(5,158)
264,636
109,019
34,450
52,325
19,575
1,937
37,537
4,681
259,524
392,467
125,383
215,617
79,049
68,927
5,478
41,573
928,494
70,523
14,525
64,124
(412,257)
6,785
(36,108)
2,747
(40,596)
(67,172)
6,030
(35,290)
5,365
16,312
(7,583)
23,687
(142,925)
5,623
(96,273)
(209,888)
29,103
(139,232)
(1,900)
(2,141)
(114,170)
3,351
6,942
(145,764)
(526,427)
(4,169)
(30,327)
(149,933)
(556,754)
Income (loss) from operations
Interest income
Interest expense
Other income (expense), net
Other gains (losses), net
Total non-operating expenses, net
$
Year Ended
December 31,
Income (loss) before equity in losses of equity-method investees
Equity in losses of equity-method investees, net
(700)
(1,855)
Income (loss) before change in accounting principle
2,651
5,087
Cumulative effect of change in accounting principle
-
-
374,250
138,283
241,165
89,862
4,637
181,033
181,585
1,210,815
801
(10,523)
Net income (loss)
$
2,651
$
5,087
$
(149,132)
$
(567,277)
Basic income (loss) per share:
Prior to cumulative effect of change in accounting principle
Cumulative effect of change in accounting principle
$
0.01
0.01
$
0.01
0.01
$
(0.40)
0.01
(0.39)
$
(1.53)
(0.03)
(1.56)
0.01
0.01
$
0.01
0.01
$
(0.40)
0.01
(0.39)
$
$
Diluted income (loss) per share:
Prior to cumulative effect of change in accounting principle
Cumulative effect of change in accounting principle
$
$
Shares used in computation of income (loss) per share:
Basic
Diluted
(1) Components of stock-based compensation:
Fulfillment
Marketing
Technology and content
General and administrative
$
$
383,702
407,056
$
$
6,614
1,820
18,621
8,625
35,680
$
$
371,420
384,045
$
$
275
320
1,015
327
1,937
$
378,363
378,363
$
$
Note: The attached "Financial and Operational Highlights" are an integral part of the press release financial statements.
Page 5 of 16
$
12,126
4,239
35,926
16,636
68,927
(1.53)
(0.03)
(1.56)
364,211
364,211
$
$
481
690
2,723
743
4,637
AMAZON.COM, INC.
Pro Forma Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
December 31, 2002
Pro Forma
As Reported (1)
Adjustments
Net sales
Cost of sales
Gross profit
$
Operating expenses:
Fulfillment
Marketing
Technology and content
General and administrative
Stock-based compensation
Amortization of goodwill and other intangibles
Restructuring-related and other
Total operating expenses
Income from operations
Interest income
Interest expense
Other income (expense), net
Other gains (losses), net
Total non-operating expenses, net
Income before equity in losses of equity-method investees
1,428,610
1,093,451
335,159
-
$
1,428,610
1,093,451
335,159
$
1,115,171
841,122
274,049
$
-
Pro Forma
$
1,115,171
841,122
274,049
126,559
37,579
49,048
20,015
35,680
913
(5,158)
264,636
(35,680)
(913)
5,158
(31,435)
126,559
37,579
49,048
20,015
233,201
109,019
34,450
52,325
19,575
1,937
37,537
4,681
259,524
(1,937)
(37,537)
(4,681)
(44,155)
109,019
34,450
52,325
19,575
215,369
70,523
31,435
101,958
14,525
44,155
58,680
6,785
(36,108)
2,747
(40,596)
(67,172)
40,596
40,596
6,785
(36,108)
2,747
(26,576)
6,030
(35,290)
5,365
16,312
(7,583)
(16,312)
(16,312)
6,030
(35,290)
5,365
(23,895)
3,351
72,031
75,382
6,942
27,843
34,785
-
(1,855)
1,855
-
Equity in losses of equity-method investees, net
(700)
Net income
$
2,651
Net cash provided by operating activities
$
372,579
Basic income per share
Diluted income per share
$
$
0.01
0.01
Shares used in computation of income per share
Basic
Diluted
$
Pro Forma
Three Months Ended
December 31, 2001
Pro Forma
As Reported (1)
Adjustments
700
$
72,731
$
$
0.19
0.18
$
75,382
$
5,087
$
372,579
$
349,120
$
$
0.20
0.19
$
$
0.01
0.01
383,702
407,056
(1) In accordance with accounting principles generally accepted in the United States.
Note: The attached "Financial and Operational Highlights" are an integral part of the press release financial statements.
Page 6 of 16
383,702
407,056
371,420
384,045
$
$
$
29,698
0.08
0.08
$
34,785
$
349,120
$
$
0.09
0.09
371,420
384,045
AMAZON.COM, INC.
Pro Forma Statements of Operations
(in thousands, except per share data)
(unaudited)
Year Ended
December 31, 2002
Pro Forma
As Reported (1)
Adjustments
Net sales
Cost of sales
Gross profit
$
Operating expenses:
Fulfillment
Marketing
Technology and content
General and administrative
Stock-based compensation
Amortization of goodwill and other intangibles
Restructuring-related and other
Total operating expenses
3,932,936
2,940,318
992,618
$
-
Pro Forma
$
3,932,936
2,940,318
992,618
392,467
125,383
215,617
79,049
68,927
5,478
41,573
928,494
(68,927)
(5,478)
(41,573)
(115,978)
392,467
125,383
215,617
79,049
812,516
64,124
115,978
180,102
Interest income
Interest expense
Other income (expense), net
Other gains (losses), net
Total non-operating expenses, net
23,687
(142,925)
5,623
(96,273)
(209,888)
96,273
96,273
Income (loss) before equity in losses of equity-method investees
(145,764)
212,251
(4,169)
4,169
(149,933)
216,420
Income (loss) from operations
Equity in losses of equity-method investees, net
Income (loss) before change in accounting principle
Cumulative effect of change in accounting principle
801
Net income (loss)
$
(149,132)
Net cash provided by (used in) operating activities
$
174,291
Basic income (loss) per share:
Prior to cumulative effect of change in accounting principle
Cumulative effect of change in accounting principle
$
$
Diluted income (loss) per share:
Prior to cumulative effect of change in accounting principle
Cumulative effect of change in accounting principle
$
$
Shares used in computation of income (loss) per share
Basic
Diluted
(801)
$
(0.40)
0.01
(0.39)
$
(0.40)
0.01
(0.39)
$
$
$
215,619
Year Ended
December 31, 2001
Pro Forma
As Reported (1)
Adjustments
$
3,122,433
2,323,875
798,558
$
374,250
138,283
241,165
89,862
4,637
181,033
181,585
1,210,815
(412,257)
367,255
(45,002)
23,687
(142,925)
5,623
(113,615)
29,103
(139,232)
(1,900)
(2,141)
(114,170)
2,141
2,141
29,103
(139,232)
(1,900)
(112,029)
66,487
(526,427)
369,396
(157,031)
-
(30,327)
30,327
66,487
(556,754)
399,723
-
(10,523)
10,523
$
(567,277)
$
174,291
$
(119,782)
0.58
(0.01)
0.57
$
0.18
0.18
$
(1.53)
(0.03)
(1.56)
$
0.57
(0.01)
0.56
$
0.17
0.17
$
(1.53)
(0.03)
(1.56)
$
378,363
378,363
(1) In accordance with accounting principles generally accepted in the United States.
Note: The attached "Financial and Operational Highlights" are an integral part of the press release financial statements.
Page 7 of 16
3,122,433
2,323,875
798,558
374,250
138,283
241,165
89,862
843,560
66,487
$
$
(4,637)
(181,033)
(181,585)
(367,255)
$
$
-
Pro Forma
378,363
399,656
$
$
364,211
364,211
$
$
$
410,246
(157,031)
$
(157,031)
$
(119,782)
1.10
0.03
1.13
$
(0.43)
(0.43)
1.10
0.03
1.13
$
$
$
(0.43)
(0.43)
364,211
364,211
AMAZON.COM, INC.
Segment Information
(in thousands)
(unaudited)
Three Months Ended December 31, 2002
Books, Music
and DVD/Video
Net sales
Gross profit
Pro forma income (loss) from operations
Stock-based compensation
Amortization of other intangibles
Restructuring-related and other
Total non-operating expenses, net
Equity in losses of equity-method investees, net
Net income
$
606,098
164,276
72,805
North America
Electronics,
Tools and Kitchen
$
Total
261,881 $
38,895
(9,895)
International
867,979
203,171
62,910
$
Services
461,418
91,988
19,992
$
Consolidated
99,213
40,000
19,056
$
$
Segment highlights:
Y / Y net sales growth
Y / Y gross profit growth
Gross margin
Pro forma operating margin
Net sales mix
13%
17%
27%
12%
43%
21%
12%
15%
(4%)
18%
15%
16%
23%
7%
61%
76%
67%
20%
4%
32%
1%
(10%)
40%
19%
7%
1,428,610
335,159
101,958
(35,680)
(913)
5,158
(67,172)
(700)
2,651
28%
22%
23%
7%
100%
Three Months Ended December 31, 2001
Books, Music
and DVD/Video
Net sales
Gross profit
Pro forma income (loss) from operations
Stock-based compensation
Amortization of goodwill and other intangibles
Restructuring-related and other
Total non-operating expenses, net
Equity in losses of equity-method investees, net
Net income
Segment highlights:
Y / Y net sales growth
Y / Y gross profit growth
Gross margin
Pro forma operating margin
Net sales mix
$
538,012
139,812
63,938
North America
Electronics,
Tools and Kitchen
$
216,614 $
34,678
(20,423)
Total
International
754,626
174,490
43,515
$
262,432 $
55,028
(10,550)
Services
Consolidated
98,113
44,531
25,715
$
$
5%
1%
26%
12%
48%
(2%)
55%
16%
(9%)
19%
Note: The attached "Financial and Operational Highlights" are an integral part of the press release financial statements.
Page 8 of 16
3%
8%
23%
6%
67%
81%
110%
21%
(4%)
24%
3%
21%
45%
26%
9%
1,115,171
274,049
58,680
(1,937)
(37,537)
(4,681)
(7,583)
(1,855)
5,087
15%
22%
25%
5%
100%
AMAZON.COM, INC.
Segment Information
(in thousands)
(unaudited)
Year Ended December 31, 2002
Books, Music
and DVD/Video
Net sales
Gross profit
Pro forma income (loss) from operations
Stock-based compensation
Amortization of other intangibles
Restructuring-related and other
Total non-operating expenses, net
Equity in losses of equity-method investees, net
Cumulative effect of change in accounting principle
Net loss
$
1,873,291
527,542
211,363
North America
Electronics,
Tools and Kitchen
$
645,031 $
89,863
(73,220)
Total
International
2,518,322
617,405
138,143
$
1,168,935 $
249,089
(640)
Services
Consolidated
245,679
126,124
42,599
$
$
Segment highlights:
Y / Y net sales growth
Y / Y gross profit growth
Gross margin
Pro forma operating margin
Net sales mix
11%
16%
28%
11%
48%
18%
15%
14%
(11%)
16%
13%
16%
25%
5%
64%
77%
77%
21%
(0%)
30%
9%
(0%)
51%
17%
6%
3,932,936
992,618
180,102
(68,927)
(5,478)
(41,573)
(209,888)
(4,169)
801
(149,132)
26%
24%
25%
5%
100%
Year Ended December 31, 2001
Books, Music
and DVD/Video
Net sales
Gross profit
Pro forma income (loss) from operations
Stock-based compensation
Amortization of goodwill and other intangibles
Restructuring-related and other
Total non-operating expenses, net
Equity in losses of equity-method investees, net
Cumulative effect of change in accounting principle
Net loss
Segment highlights:
Y / Y net sales growth
Y / Y gross profit growth
Gross margin
Pro forma operating margin
Net sales mix
$
1,688,752
453,129
156,753
North America
Electronics,
Tools and Kitchen
$
547,190 $
78,384
(140,685)
Total
International
2,235,942
531,513
16,068
$
661,374 $
140,606
(103,112)
Services
Consolidated
225,117
126,439
42,042
$
$
(1%)
9%
27%
9%
54%
13%
76%
14%
(26%)
18%
Note: The attached "Financial and Operational Highlights" are an integral part of the press release financial statements.
Page 9 of 16
2%
15%
24%
1%
72%
74%
82%
21%
(16%)
21%
13%
9%
56%
19%
7%
3,122,433
798,558
(45,002)
(4,637)
(181,033)
(181,585)
(114,170)
(30,327)
(10,523)
(567,277)
13%
22%
26%
(1%)
100%
AMAZON.COM, INC.
Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities
Inventories
Accounts receivable, net and other current assets
Total current assets
Fixed assets, net
Goodwill, net
Other intangibles, net
Other equity investments
Other assets
Total assets
December 31,
2002
December 31,
2001
$
$
$
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Unearned revenue
Interest payable
Current portion of long-term debt and other
Total current liabilities
$
Long-term debt and other
738,254
562,715
202,425
112,282
1,615,676
239,398
70,811
3,460
15,442
45,662
1,990,449
618,128
314,935
47,916
71,661
13,318
1,065,958
$
$
2,277,305
540,282
456,303
143,722
67,613
1,207,920
271,751
45,367
34,382
28,359
49,768
1,637,547
444,748
305,064
87,978
68,632
14,992
921,414
2,156,133
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value:
Authorized shares -- 500,000
Issued and outstanding shares -- none
Common stock, $0.01 par value:
Authorized shares -- 5,000,000
Issued and outstanding shares -- 387,906 and 373,218, respectively
Additional paid-in capital
Deferred stock-based compensation
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders' deficit
Total liabilities and stockholders' deficit
-
$
3,879
1,649,946
(6,591)
9,662
(3,009,710)
(1,352,814)
1,990,449
Note: The attached "Financial and Operational Highlights" are an integral part of the press release financial statements.
Page 10 of 16
-
$
3,732
1,462,769
(9,853)
(36,070)
(2,860,578)
(1,440,000)
1,637,547
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
Q4 2001
Q1 2002
Q2 2002
Q3 2002
Q4 2002
Y/Y%
Growth
Results of Operations
Net sales
Net sales -- trailing twelve months (TTM)
Net sales shipped outside the U.S. -- % of net sales
$
$
1,115 $
3,122 $
29%
847 $
3,269 $
34%
806 $
3,407 $
34%
851 $
3,619 $
36%
1,429
3,933
37%
28%
26%
N/A
Gross profit
Gross margin -- % of net sales
Gross profit -- TTM
Gross margin -- TTM % of net sales
$
274 $
24.6%
799 $
25.6%
223 $
26.3%
839 $
25.7%
218 $
27.1%
878 $
25.8%
216 $
25.4%
932 $
25.7%
335
23.5%
993
25.2%
22%
N/A
24%
N/A
9.8%
12.0%
10.7%
10.6%
11.2%
11.3%
10.6%
10.7%
11.3%
10.6%
10.4%
11.2%
8.9%
10.0%
9.5%
N/A
N/A
N/A
233
813
8%
(4%)
$
Fulfillment costs -- % of net sales
Fulfillment costs -- TTM % of net sales
Fulfillment costs -- % of net sales, excluding Services net sales
Pro forma operating expenses
Pro forma operating expenses -- TTM
$
$
Pro forma operating income
Pro forma operating margin -- % of net sales
Pro forma operating income (loss) -- TTM
Pro forma operating margin -- TTM % of net sales
$
GAAP operating income (loss)
GAAP operating margin -- % of net sales
GAAP operating income (loss) -- TTM
GAAP operating margin -- TTM % of net sales
$
$
$
215
844
$
$
198
811
$
$
192
795
$
$
189
795
$
$
59 $
5.3%
(45) $
(1.4%)
25 $
2.9%
28 $
0.9%
26 $
3.2%
82 $
2.4%
27 $
3.2%
137 $
3.8%
102
7.1%
180
4.6%
74%
N/A
N/A
N/A
15 $
1.3%
(412) $
(13.2%)
2 $
0.2%
(194) $
(5.9%)
1 $
0.2%
(53) $
(1.5%)
(10) $
(1.1%)
8 $
0.2%
71
4.9%
64
1.6%
386%
N/A
N/A
N/A
75
0.19
66
117%
104%
N/A
3
0.01
(149)
(48%)
(51%)
(74%)
606
1,873
164
27.1%
73
12%
13%
11%
17%
N/A
14%
N/A
262
645
39
14.9%
(10)
(4%)
21%
18%
12%
N/A
(52%)
N/A
461
1,169
92
19.9%
20
4%
76%
77%
67%
N/A
N/A
N/A
99
246
40
40.3%
19
19%
1%
9%
(10%)
N/A
(26%)
N/A
Pro forma net income (loss)
Diluted pro forma net income (loss) per share
Pro forma net income (loss) -- TTM
$
$
$
35 $
0.09 $
(157) $
(5) $
(0.01) $
(86) $
(4) $
(0.01) $
(32) $
GAAP net income (loss)
GAAP net income (loss) per share
GAAP net loss -- TTM
$
$
$
5 $
0.01 $
(567) $
(23) $
(0.06) $
(356) $
(94) $
(0.25) $
(281) $
(35) $
(0.09) $
(147) $
443
1,722
123
27.8%
46
10%
$
$
$
412
1,744
124
30.0%
49
12%
$
$
$
412
1,805
116
28.2%
43
10%
$
$
$
126
557
19
15.4%
(21)
(16%)
$
$
$
128
574
19
14.4%
(18)
(14%)
$
$
$
129
600
13
10.1%
(24)
(19%)
$
$
$
226
755
49
21.7%
(11)
(5%)
$
$
$
218
845
47
21.7%
(10)
(5%)
$
$
$
264
970
61
23.0%
1
0%
$
$
$
47
244
29
60.9%
6
12%
$
$
$
47
245
26
55.4%
8
16%
$
$
$
North America Books, Music and DVD/Video (BMVD) segment:
BMVD net sales
BMVD net sales -- TTM
BMVD gross profit
BMVD gross margin -- % of BMVD net sales
BMVD pro forma operating profit
BMVD pro forma operating margin -- % of BMVD net sales
North America Electronics, Tools and Kitchen (ETK) segment:
ETK net sales
ETK net sales -- TTM
ETK gross profit
ETK gross margin -- % of ETK net sales
ETK pro forma operating loss
ETK pro forma operating margin -- % of ETK net sales
International segment:
International net sales
International net sales -- TTM
International gross profit
International gross margin -- % of International net sales
International pro forma operating profit (loss)
International pro forma operating margin -- % of International net sales
Services segment:
Services net sales
Services net sales -- TTM
Services gross profit
Services gross margin -- % of Services net sales
Services pro forma operating profit
Services pro forma operating margin -- % of Services net sales
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
538
1,689
140
26.0%
64
12%
$
$
$
217
547
35
16.0%
(20)
(9%)
$
$
$
262
661
55
21.0%
(11)
(4%)
$
$
$
98
225
45
45.4%
26
26%
$
$
$
$
$
$
$
53
236
32
59.9%
10
20%
$
$
$
$
$
$
$
$
$
$
$
0
0.00
26
of 16 Financial Information and Business Metrics.
Note: The attached "Financial and Operational Highlights" are an integral partPage
of this11
Supplemental
$
$
$
$
$
$
$
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days, and employee data)
(unaudited)
Q4 2001
Q1 2002
Q2 2002
Q3 2002
Q4 2002
Y/Y%
Growth
Balance Sheet
Cash and marketable securities
$
997
Inventory, net
Inventory -- % of TTM net sales
Inventory turnover -- TTM
Inventory turnover -- TTM, excluding Services cost of sales
$
144 $
5%
15.8
15.2
139 $
4%
17.4
16.7
127 $
4%
18.9
18.1
152 $
4%
19.4
18.6
202
4%
19.3
18.5
Fixed assets, net
$
272
256
249
239
239
(12%)
52
7%
Accounts payable days -- ending
$
$
49
745
$
$
45
824
$
$
46
866
$
$
50
1,301
31%
41%
N/A
22%
22%
Cash Flows
Operating cash flow -- TTM
$
(120) $
46
$
48
$
151
$
174
N/A
Free cash flow (operating cash flow less purchases of fixed assets) -- TTM
$
(170) $
10
$
16
$
120
$
135
N/A
Adjusted free cash flow (free cash flow less repayment of capital lease
obligations) -- TTM
$
(190) $
(9) $
(3) $
103
$
120
N/A
Other
Common shares outstanding
Stock-based employee awards outstanding
Stock-based employee awards outstanding -- % of common shares outstanding
Employees (full-time and part-time)
373
66
18%
7,800
375
62
17%
7,900
380
50
13%
7,700
381
48
13%
7,800
Note: The attached "Financial and Operational Highlights" are an integral part of this Supplemental Financial Information and Business Metrics.
Page 12 of 16
388
45
12%
7,500
4%
(32%)
N/A
(4%)
AMAZON.COM, INC.
Financial and Operational Highlights
(unaudited)
Results of Operations (all comparisons are with the equivalent period of the prior year)
Net Sales


Net sales benefited from changes in foreign-currency exchange rates compared with the prior year by approximately
$35 million in the fourth quarter 2002 ($3 million benefit to pro forma operating profit) and $47 million for fiscal
2002 ($4 million benefit to pro forma operating profit).
Shipping revenue, which excludes commissions earned from Amazon Marketplace, was approximately $121
million in the fourth quarter, down from $125 million.
Gross Profit

Shipping costs increased 11% to $151 million in the fourth quarter 2002 and shipping loss increased to
approximately $30 million, from a loss of $11 million. We continue to measure our shipping results relative to their
effect on our overall financial results, with the viewpoint that shipping promotions are an effective marketing tool.
We expect to continue offering our customers free shipping options, which reduce shipping revenue as a percentage
of sales and negatively affect gross margins.
Fulfillment

Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service
centers, credit card fees and bad debt costs. Fulfillment costs also include amounts paid to third-party cosourcers,
who assist us in fulfillment and customer service operations. Certain Services-segment fulfillment-related costs
incurred on behalf of third-party sellers are classified as cost of sales rather than fulfillment.
Stock-Based Compensation

During the first quarter 2001, we offered a limited non-compulsory exchange of employee stock options, which
results in variable accounting treatment for approximately 5 million stock options at December 31, 2002, including
approximately 4 million options granted under the exchange offer that have an exercise price of $13.375 and expire
in the third quarter 2003. Variable accounting treatment will result in unpredictable charges or credits dependent on
the fluctuations in quoted prices for our common stock, which we are unable to forecast.
o At December 31, 2002, cumulative compensation expense associated with variable accounting treatment,
including $31 million in the fourth quarter 2002, was approximately $60 million—based on exercises to date
and a quarter-end closing common stock price of $18.89—of which $40 million is associated with options
exercised and no longer subject to future variability.
o We have quantified the hypothetical effect on stock-based compensation associated with various quoted prices
of our common stock using a sensitivity analysis for our outstanding stock options subject to variable
accounting. We have provided this information to give additional insight into the volatility we will experience in
our future results of operations to the extent that the quoted price for our common stock is above $13.375. This
sensitivity analysis is not a prediction of future performance of the quoted prices of our common stock. Using
the following hypothetical market prices of our common stock above $13.375 (including the actual expense
associated with options exercised), our hypothetical cumulative compensation expense at December 31, 2002,
and the difference between hypothetical cumulative compensation expense and actual cumulative compensation
expense recorded at December 31, 2002, resulting from variable accounting treatment would have been as
follows (in millions, except per share amounts):
Page 13 of 16
Hypothetical Increase
Over $13.375 per Share

Hypothetical Market
Price per Share
Hypothetical Cumulative
Compensation Expense
Hypothetical vs. Cumulative
Compensation Expense
December 31, 2002
15%
$15.38
$47
$ (13)
25%
$16.72
$52
$ (8)
50%
$20.06
$65
$ 4
75%
$23.41
$77
$ 17
100%
$26.75
$90
$ 29
Actual variable-accounting-related compensation could differ significantly from the above illustration in
instances where options are exercised during a period at prices that differ from the closing stock price for the
reporting period.
Under our restricted stock unit program, which commenced in the fourth quarter 2002, we award restricted stock
units as our primary vehicle for employee equity compensation. Restricted stock units are measured at fair value on
the date of grant based on the number of shares granted and the quoted price of our common stock. Such value is
recognized as an expense ratably over the corresponding service period. To the extent that restricted stock units are
forfeited prior to vesting, the corresponding previously recognized expense is reversed as an offset to stock-based
compensation.
Amortization of Goodwill and Other Intangibles

As a result of our adoption of Statement of Financial Accounting Standards No. 141 and No. 142, during the first
quarter 2002 we reclassified $25 million of other intangible assets (comprising only assembled workforce
intangibles) into goodwill and discontinued the amortization of our goodwill.
Restructuring-Related and Other



In January 2001, we announced and began implementation of our operational restructuring plan to reduce our
operating costs, streamline our organizational structure, consolidate certain of our fulfillment and customer service
operations and migrate a large portion of our technology infrastructure to a new operating platform. The
restructuring plan is complete, although we may adjust our estimates prospectively if necessary.
Corresponding with our January 2001 operational restructuring, in the fourth quarter 2002 we reached a termination
agreement with the landlord of our leased fulfillment center facility in McDonough, Georgia. This agreement
requires payments totaling $12 million, $4 million of which was paid in the fourth quarter 2002 ($8 million is
payable first quarter 2003). As a result of this agreement, in the fourth quarter 2002 we adjusted our restructuring
liability to reflect current estimates of restructuring-related cash flows and recorded a $5 million restructuringrelated gain.
Restructuring-related cash payments totaled $11 million in the fourth quarter 2002 (including the $4 million paid
with respect to our McDonough facility), compared with $14 million. We anticipate the following net cash outflows
associated with restructuring-related commitments (amounts due within 12 months are included within accrued
expenses and other current liabilities and the remaining amounts within long-term debt and other on our balance
sheet):
(in millions)
Leases (a)
Other
Year Ending December 31,
2003 ....................................................................................................
21
4
2004 ....................................................................................................
12
1
2005 ....................................................................................................
5
—
2006 ....................................................................................................
3
—
2007 ....................................................................................................
3
—
Thereafter ...........................................................................................
8
—
Page 14 of 16
Total
25
13
5
3
3
8
Total estimated cash outflows .................................................................
$52
$5
$57
(a) Net of anticipated sublease income of approximately $47 million (we have signed contractual sublease
agreements covering $10 million in future payments) on gross lease obligations of $99 million.
Other Income (Expense), Net

Other income, net includes net realized gains on sales of marketable securities.
Other Gains (Losses), Net

Other losses, net primarily consist of a foreign-currency loss on the remeasurement of our 6.875% Eurodenominated convertible subordinated notes (PEACS) from Euros to U.S. dollars. We are unable to accurately
forecast the effect on our future reported results associated with the remeasurement of the PEACS.
Income Taxes

At December 31, 2002, we had net operating loss carryforwards (NOLs) of approximately $2.5 billion related to
U.S. federal, state and foreign jurisdictions. Utilization of NOLs, which begin to expire at various times starting in
2010, may be subject to certain limitations. Approximately $1.2 billion of our NOLs relate to deductible stock-based
compensation in excess of amounts recognized for financial reporting purposes—to the extent any of this amount is
realized, the resulting benefit will be credited to stockholders’ equity, rather than results of operations.
Net Income


Although we reported fourth quarter 2002 positive net income of $3 million, we believe that this positive net income
result should not be viewed as a material positive event and is not predictive of future trends for a variety of reasons.
For example, excluding the $5 million restructuring-related gain associated with our McDonough, Georgia,
fulfillment center lease-termination agreement, we would have reported a net loss in the fourth quarter 2002.
Alternatively, excluding the $31 million stock-based compensation charge associated with variable accounting
treatment on certain of our employee stock options that resulted from an increase in our stock price during the fourth
quarter, or excluding the $38 million foreign-currency loss on the remeasurement of our PEACS from Euros to U.S.
dollars, we would have reported more net income in the fourth quarter 2002.
We are unable to forecast the effect on our future reported results of certain items, including the stock-based
compensation charges or credits associated with variable accounting treatment on certain of our employee stock
options that will result from fluctuations in our stock price, and the gain or loss associated with our PEACS that will
result from fluctuations in foreign-currency rates.
Financial Condition

Our marketable securities, at estimated fair value, consist of the following at December 31, 2002 (in millions):
Asset-backed and agency securities
Treasury notes and bonds
Corporate notes and bonds
Certificates of deposit
Commercial paper, short-term obligations and equity securities

$317
175
43
22
6
$563
At December 31, 2002, we have pledged approximately $121 million of our marketable securities as collateral for
certain contractual obligations, compared with $167 million. Amounts pledged for standby letters of credit that
guarantee certain contractual obligations, primarily property leases, were $58 million; $23 million is pledged for a
swap agreement that hedges the foreign-exchange-rate risk on a portion of our PEACS; and $40 million is pledged
for certain of our real estate lease agreements. The amount of marketable securities we are required to pledge
pursuant to the swap agreement fluctuates with the fair market value of the swap obligation.
Page 15 of 16

Long-term debt primarily includes the following (in millions):
Principal
Interest
at Maturity
Rate
Principal
Due Date
Senior Discount Notes........................................................................
$ 264(a)
10.000%
May 2008
Convertible Subordinated Notes ........................................................
1,250
4.750%
February 2009
PEACS ...............................................................................................
725(b)
6.875%
February 2010
Total long-term debt ................................................................................
$2,239
(a) $256 million at December 31, 2002
(b) 690 million Euros
Certain Definitions and Other







Our segment reporting includes four segments: North America Books, Music and DVD/Video (“BMVD”); North
America Electronics, Tools and Kitchen (“ETK”); International; and Services. Stock-based compensation,
amortization of goodwill and other intangibles, and restructuring-related and other costs are not allocated to segment
results. All other centrally incurred operating costs are fully allocated to segment results. There are no internal
transactions between the Company’s reporting segments.
The BMVD segment includes revenues, direct costs and cost allocations primarily associated with retail sales from
www.amazon.com and www.amazon.ca for books, music, DVDs, video products and magazine subscription
commissions. This segment also includes revenues from stores offering these products through our Syndicated
Stores Program, such as www.borders.com, and commissions and other amounts earned from sales of these products
offered by third-party sellers (businesses and individuals) under our Amazon Marketplace (such as a used out-ofprint book) and [email protected] Programs.
The ETK segment includes revenues, direct costs and cost allocations primarily associated with www.amazon.com
retail sales of electronics, home improvement and home and garden products, as well as our catalog sales of toys and
tools. This segment also includes commissions and other amounts earned from sales of these products offered by
third-party sellers under our Amazon Marketplace and [email protected] Programs.
The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of
our internationally focused U.K., German, French and Japanese Web sites—www.amazon.co.uk, www.amazon.de,
www.amazon.fr and www.amazon.co.jp. This segment also includes commissions and other amounts earned from
sales of products offered by third-party sellers under our Amazon Marketplace and [email protected]
Programs and revenues from stores offering products through our Syndicated Stores Program.
The Services segment includes revenues, direct costs and cost allocations associated with certain of our commercial
agreements, including the Merchant Program, such as www.target.com, and the [email protected] Program to
the extent full product categories are not also offered by our online retail stores, such as Toys and Games and
Apparel and Accessories. This segment also includes our technology alliance with America Online and
miscellaneous marketing, promotional and other agreements.
All references to customers mean customer accounts, which are unique e-mail addresses, established either when a
customer’s initial order is shipped or when a customer orders from certain third-party sellers on our Web sites.
Customer accounts include customers of Amazon Marketplace, Auctions and zShops and our
[email protected] and Syndicated Stores Programs, but exclude Merchant Program customers, Amazon.com
Payments customers, our catalog customers and the customers of select companies with whom we have a technology
alliance or marketing and promotional relationships. A customer is considered active upon placing an order.
All references to units mean units sold (net of returns and cancellations) by us and third-party sellers at Amazon.com
domains worldwide—such as www.amazon.com, www.amazon.ca, www.amazon.fr, www.amazon.co.uk,
www.amazon.de and www.amazon.co.jp—and at Syndicated Stores domains, as well as Amazon.com-owned items
sold at non-Amazon.com domains, such as books, music and DVD/video items ordered from Amazon.com's store at
www.target.com. Units do not include Amazon.com gift certificates.
Page 16 of 16